How Intellectual Property Can Become Commingled in a Divorce

Intellectual property, or IP, is an idea that you can monetize. It can be a character for film, comics, or novel franchises. IP be a company logo or mascot, the formula for a new medicine, a song, etc. You can make money by licensing your IP, creating merchandise, and so on.

Intellectual property becomes a big, important part of someone’s income. There are many “one-hit wonder” musicians, for instance, who’ve lived comfortably off song royalties for years. Once your IP becomes successful, you begin relying on and expecting it as part of your livelihood.

If you’re not careful, your IP could come under dispute in a divorce. Ownership of IP centers around how property is classified within a marriage. Typically, property is either marital, belonging to both parties, or separate, belonging to just one person. However, separate property can become “commingled,” meaning the court must decide who is its rightful owner.

Here are some scenarios that will determine whether your intellectual property is separate, marital, or commingled.

IP as Separate Property

In a marriage, property is separate when it comes from outside the union. For instance, if a friend gives you a gift, the law assumes that it is meant for you alone, not to be shared with your spouse. Similarly, any property you inherit should remain separate. Property that you owned before your marriage is usually separate as well.

When you create something while you are married, that creation generally remains separate. Whether you are starting a business or painting a picture, you should be allowed to retain sole ownership of that property.

If your spouse tries to gain some ownership of your separate IP, you must demonstrate that the creation is yours alone. Any money you made off that IP will likely be considered marital property, and that money is up for debate. The creation itself, however, should not be shared with your spouse.

IP as Marital Property

Marital property is shared equally among spouses. Generally, anything that you purchase while married is marital property. The law assumes that all your spending is for the benefit of the family, so you co-own anything your spouse buys and vice versa.

Also, anything you create together will ultimately be marital property. If your spouse was your lab partner, and you created a medicinal formula together, you will be co-owners of that IP. You may have already signed contracts determining who owns what percent of the IP. In case you haven’t, however, you should assume that it is shared between you equally.

In a divorce, marital property is divided one of two ways. Many states use the equitable property division method, meaning that property is divided by fairness. If, for example, the two spouses created the IP together, but only one of them manages and does all the work for that IP, that spouse may be able to keep it for themselves.

Nevada is among nine states that use the more traditional community property division model. In this system, courts attempt to give each spouse 50% of the overall marital assets. If you can keep the IP for yourself, you will still owe your spouse 50% of its value. This means you must pay them a sum directly or trade physical property up to 50% of the IP’s value.

Consult with your lawyer about your best course when splitting your IP. It may be easier to simply give your spouse a percentage of any profits as the co-creator. Conversely, it may be better for you to fight it out and retain sole ownership. Your attorney should carefully review your options and help find the best option for you.

IP as Commingled Property

With any property division decision, contribution is a big issue. For instance, the spouse who made the biggest contribution to a home’s upkeep may be able to keep it, even if they didn’t pay for it.

Intellectual property works the same way. If you did all the work on the IP yourself, your spouse will find it hard to claim any ownership of it. However, if your spouse contributed to the IP, they could fight for entitlement in court.

Here are some contributions that could make your IP commingled.

Financial Support

Imagine you create a new superhero, Microphone Man. You quit your job and devote all your time to developing the character and working on his comic book. During this time, your spouse pays all the bills and financially supports you while you work. If Microphone Man becomes a success, your spouse could ask for a portion of ownership in court, even if they never directly worked on the character.

Ideas

When your IP is a piece of art, it’s hard to define what makes it successful. Would Batman, for example, be as popular if his costume were a different color? The inability to pinpoint exactly what makes a property appealing works in favor of anyone who contributed to the IP.

From the smallest color or shape in a logo to a fictional character’s background, it all adds up to what makes the IP attractive. If your spouse makes any contribution to your IP, no matter how small, they can claim that they were partially responsible for its success.

Protecting Your IP

To keep your commingled intellectual property in a divorce, you must make a strong argument for your contribution. Even if your spouse helped you with the idea, you may have been the only one to shepherd and nurture it from there. Perhaps you even reverted some of your spouse’s initial contributions. Only the court can decide what to do with commingled property, so it’s up to you and your attorney to build a strong case for keeping it.

If you’re concerned about the future of your intellectual property in a divorce, contact our firm for help. We can give you a free consultation, so reach out online or call (702) 904-9898 today.

Categories